United States v. Ebay, Inc.

• Decision Date: 27 September 2013
• Docket Number: Case No.: 5:12–CV–05869–EJD,5:12–cv–05869
• Citation: 968 F.Supp.2d 1030
• Court: U.S. District Court — Eastern District of California
• Parties: United States of America, Plaintiff, v. eBay, Inc., Defendant.

968 F.Supp.2d 1030

United States of America, Plaintiff,

v.eBay, Inc., Defendant.

Case No.: 5:12–CV–05869–EJD

5:12–cv–05869

United States District Court, N.D. California.

San Jose Division

September 27, 2013

N. Scott Sacks, Adam T. Severt, Jessica N. Butler–Arkow, Ryan Struve, U.S. Dept. of Justice, Washington, DC, Alex Gene Tse, Brian Joseph Stretch, U.S. Attorneys Office, San Jose, CA, Anna Tryon Pletcher, Department of Justice, San Francisco, CA, for Plaintiff.

Thomas Patrick Brown, Paul Hastings LLP, San Francisco, CA, Kirby D. Behre, Mary Jean Moltenbrey, Paul Hastings LLP, Washington, DC, for Defendant.

ORDER DENYING EBAY'S MOTION TO DISMISS THE UNITED STATES' COMPLAINT

[Re: Docket No. 15]

EDWARD J. DAVILA, United States District Judge

Presently before the court in these antitrust actions is Defendant eBay Inc.'s (“eBay”) Motion to Dismiss Plaintiff the United States of America's (“United States”) Complaint. No. 12–CV–05869 Dkt. No. 15. eBay has also moved to dismiss Plaintiff the People of the State of California's (“California”) (collectively with the United States, “Plaintiffs”) Complaint in related action No. 12–CV–05869. The court held a hearing on these matters on April 26, 2013. Having reviewed the parties' briefing and heard the parties' arguments, and for the following reasons, the court DENIES eBay's Motion as to the United States' Complaint.

I. BACKGROUND

a. Factual Background

This case concerns an alleged handshake agreement struck and occasionally refined by eBay executives, including then–CEO Meg Whitman, and Scott Cook, the founder and Chairman of the Executive Committee of Intuit, Inc. (“Intuit”), which restricted eBay and Intuit's ability to recruit or hire candidates from one another. The two complaints' factual allegations largely mirror each other. Accordingly, the following factual background is taken solely from the United States' Complaint and is assumed to be true for purposes of these Motions. See No. 12–CV–05869, Dkt. No. 1.

In November 2005, eBay's then–COO Maynard Webb wrote to Mr. Cook about a potential hire from Intuit who had contacted eBay regarding a job. Id. at ¶¶ 12, 15. Mr. Webb proposed a going-forward policy under which eBay would not actively recruit from Intuit, would give Intuit notice before making offers to senior-level Intuit employees who had initially contacted eBay, and would inform Intuit after lower-level employees had accepted offers from eBay. Id. Mr. Cook objected to the proposal to the extent it allowed any hiring of Intuit employees without prior notice to Intuit, explaining that “we don't recruit from board companies, period” and “[w]e're passionate on this.” Id. at ¶ 15. Mr. Cook committed that Intuit would refrain from making an offer to any eBay employee without prior notice to eBay and stated that “[w]e would ask the same.” Id.

According to Plaintiffs, eBay and Intuit reached and implemented an initial no-solicitation agreement by August 2006. Id. at ¶ 17. At that time, eBay was considering hiring an Intuit employee to its Paypal subsidiary. When approached about this hire, Beth Axelrod, eBay's Senior Vice President for Human Resources at the time, stated that while she was “happy to have a word with Meg [Whitman] about it,” she was “quite confident [Ms. Whitman] will say hands off because Scott [Cook] insists on a no poach policy with Intuit.” Id. Ms. Axelrod went on to confirm with Ms. Whitman that eBay in fact could not proceed with the hire without first notifying Mr. Cook. Id. eBay discontinued recruitment of that candidate, apparently because “everyone agreed ‘that it's to[o] awkward to call Scott [Cook] when [they] don't even know if the candidate has interest.” Id.

The parties continued to have discussions regarding recruiting and hiring in the ensuing months. In April 2007, Mr. Cook complained to Ms. Whitman that he was “quite unhappy” about an offer eBay planned to make to an Intuit employee who had approached eBay. Id. at ¶ 18. In response, Ms. Axelrod instructed David Knight, eBay's Vice President of Internal Communications at the time, to hold off on making the offer. Mr. Knight complained that the decision to hold back the offer put the applicant “in a bad position and [eBay] in a bad place with California law.” Id. A week later Mr. Knight explained that eBay “desperately need[ed] this position filled” and asked Ms. Axelrod and Ms. Whitman “to at least ‘negotiate’ any shift from a ‘no poaching’ agreement to a ‘no hiring’ agreement” after this particular applicant was hired. Id.

Plaintiffs allege that although this candidate was ultimately hired, eBay and Intuit's agreement thereafter “metastasized” into a no-hire policy. Id. at ¶¶ 18–19. “eBay recruiting personnel understood that ‘Meg [Whitman] and Scott Cook entered into the agreement (handshake style, not written) that eBay would not hire from Intuit, period.’ ” Id. at ¶ 21. Similarly, “Mr. Cook and Intuit ... agreed that intuit would not recruit from eBay.” Id.

The Complaints contain several examples of eBay's understanding and implementation of the agreement. For instance, when approached by two eBay employees about the policy, Ms. Axelrod explained that “[eBay] ha[s] an explicit hands of[f] that we cannot violate with any Intuit employee. There is no flexibility on this.” Id. at ¶ 20. eBay repeatedly declined to interview or hire Intuit employees, even when it had positions open for “quite some time” or when the only acceptable candidate was from Intuit. Id. at ¶ 23.

The Complaints also reflect Mr. Cook's understanding of the agreement. When speaking with a candidate who had decided to work for eBay but expressed interest in joining Intuit in the future, Mr. Cook explained that “Intuit is precluded from recruiting [the candidate]” except under limited circumstances. Id. at 21. Later, in August 2007, Ms. Whitman complained to Mr. Cook that Intuit had been recruiting eBay employees in violation of the agreement. Mr. Cook responded saying “# @!# ^&!!! Meg my apologies. I'll find out how this slip up occurred again....” Id. at ¶ 22.

In 2009, the Department of Justice's (“DOJ”) investigation of no-solicitation/no-hire agreements among technology companies became public. Id. at ¶ 25. According to Plaintiffs, eBay and Intuit's agreement remained in effect for at least some period of time after this announcement. Id. Since that time, a court in a separate action has ordered Intuit to refrain from entering into or enforcing any agreement that improperly limits competition for employee services. Id. at ¶ 9.

b. Procedural History

On November 16, 2012, Plaintiffs filed the instant actions against eBay, alleging that eBay entered into a no-solicitation/no-hire agreement with Intuit in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. No. 12–CV–05869, Dkt. No. 1; No. 12–CV–05874, Dkt. No. 1. California also raises claims under the Cartwright Act, California Business and Professions Code § 16720, and the California Unfair Competition Law (“UCL”), California Business and Professions Code § 17200 et seq. No. 12–CV–05874, Dkt. No. 1 ¶¶ 39–48. This court issued an order relating these two cases on December 11, 2012. No. 12–CV–05869, Dkt. No. 11; No. 12–CV–05874, Dkt. No. 4. While Plaintiffs point to Intuit as a co-conspirator, they have not named Intuit as a defendant in these actions because it is already subject to a court order in United States v. Adobe Systems, No. 10–01629 (D.D.C. Mar. 17, 2011), which prohibits it from entering into or enforcing any agreement that improperly limits competition for employee services. No. 12–CV–05869, Dkt. No. 1 ¶ 9.

On January 22, 2013, eBay filed the instant Motions to Dismiss pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim on the grounds that both Complaints fail to allege an actionable conspiracy and fail to allege harm to competition. eBay brings its Motion to Dismiss California's Complaint on the additional grounds that California lacks standing to assert a claim for injunctive relief under the Sherman Act and that it fails to state a claim under the Cartwright Act or the UCL. No. 12–CV–05874, Dkt. No. 9. The court now turns to the substance of eBay's motion as to the United States' Complaint.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim in the complaint with sufficient specificity to “give the defendant fair notice of what the ... claim is and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotations omitted). A complaint which falls short of the Rule 8(a) standard may be dismissed if it fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). Dismissal under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim is “proper only where there is no cognizable legal theory or an absence of sufficient facts alleged to support a cognizable legal theory.” Shroyer v. New Cingular Wireless Servs., Inc., 606 F.3d 658, 664 (9th Cir.2010) (quoting Navarro v. Block, 250 F.3d 729, 732 (9th Cir.2001)). In consideringwhether the complaint is sufficient to state a claim, the court must accept as true all of the factual allegations contained in the complaint. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). While a complaint need not contain detailed factual allegations, it “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Id. (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955).

III. DISCUSSION

A. Sherman Act Claim

Section 1 of the Sherman Act, 15 U.S.C. § 1, prohibits “[e]very contract, combination ... or conspiracy[ ] in restraint of trade or commerce among the several States.” Despite this broad language, the Supreme Court has recognized that Congress intended only to “outlaw ... unreasonable restraints.” Texaco Inc. v. Dagher, 547 U.S. 1, 5, 126 S.Ct. 1276, ...